Wherehouse Bids for Blockbuster Music

Media conglomerate Viacom, parent company of Blockbuster Music, has reportedly put the ailing chain on the auction block. Most likely buyer is Torrance, California-based music retailer Wherehouse Entertainment, Inc., which has 220 stores of its own, primarily on the West Coast. On Wednesday, May 13, Reuters news service reported that Wherehouse had tendered an offer of $200 million for Blockbuster. Wherehouse has been in intermittent discussions for several months with Viacom.

Blockbuster has closed more than 30 stores this year in an attempt to "make the unit more attractive for a sale," the report said. Larry Gaines is the new top gun brought in to spruce up the operation. The 393-store chain posted sales of $133.3 million in the first quarter of this year, with a loss of $2.5 million.

Wherehouse has its own history of difficulties, having sought Chapter 11 bankruptcy protection in August 1995. The company emerged from bankruptcy this year with a fund of about $35 million and an agenda of shutting down its own marginal stores and buying up other music chains. A year ago, Camelot Music was unsuccessfully approached as a takeover target.

The music business has picked up slightly this past year, but has been slow for several years. A number of high-level executives were dismissed as a result, and many independent retailers have closed their doors. "The music retail business has been on its ear and . . . losing significant money," Steve Cesinger of the investment bank Greif & Company said, explaining that Viacom "may just want to get out of its leases."

Viacom is spinning off other marginal businesses---publishing house Simon & Schuster is one---to concentrate on its profitable cable-TV and movie-studio operations. In addition to Blockbuster Music, Viacom also owns Paramount Pictures and Paramount Home Video. Its long-troubled Blockbuster Video is said to be turning the corner in its quest for viability.